After Extrapolating the Results of Performing Substantive Tests on a Sample

question 16

Multiple Choice

After extrapolating the results of performing substantive tests on a sample of accounts from the accounts receivable subsidiary ledger, Allen CA concluded that the accounts receivable balance was materially misstated.In fact, the balance was materially correct.This situation illustrates the risk of

• A)Incorrect rejection.
• B)Incorrect acceptance.
• C)Assessing control risk too low.
• D)Assessing control risk too high.

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Definitions:

Undertake

To commit oneself to and begin (an enterprise or responsibility); to take on.

APR

Annual Percentage Rate, the annual rate charged for borrowing or earned through an investment.

Compounded Daily

A method where interest is calculated and added to the account balance every day, leading to higher yields over time.

Loan

Borrowed money that is typically repaid with interest.